BANI WALID, Libya (Reuters) - Hundreds of cars filled with families took advantage of the quiet lull after the Muslim holiday of Eid to return to their homes after a siege around the former Gaddafi stronghold of Bani Walid was lifted.

A week earlier, a similar stream of cars carrying the same people headed the other way. Families loaded with belongings fled attacks from militiamen aligned with the government who said they were wresting control of a city that remained anti-revolution.

Fighters captured the town on October 24 amid chaotic, vengeful scenes that demonstrated the weakness of the new government's hold over militiamen who owe it allegiance but largely do as they please.

Abbas Ali, 25, was driving his family back home after being forced to leave Bani Walid when his home was hit by a mortar bomb, wounding his sister.

"I have no idea what is waiting for me when I go back home," he said, looking over the long line of cars.

Pro-government forces moved on Bani Walid after Omran Shaaban, the fighter who found ousted leader Muammar Gaddafi hiding in a drain in Sirte weeks after rebels took Tripoli, died following two months of detention in the town.

The militias, mostly from the rival city of Misrata, set out to find those suspected of abducting and torturing Shaban, and the national congress gave Bani Walid a deadline to hand them over.

Bani Walid residents baulked at turning over the wanted men accused of torturing Shaaban to unruly groups while the justice system remains in disarray.

The standoff highlighted the government's inability to bring many of the militias that deposed Gaddafi fully under its control. Reconciliation between rival towns such as Bani Walid, one of the last places to fall to rebels in last year's war, and Misrata will be one of the many challenges facing the new government of Prime Minister Ali Zeidan.

Bani Walid, 170 km southeast of Tripoli, was shelled for days, forcing thousands to flee, wounding hundreds and killing more than 20 people.

ELECTRICITY RETURNS TO TOWN

This weekend, Bani Walid was a quiet town slowly picking itself up. Shops and bakeries were open, and police set up check points. Electrical workers stood on cranes fixing dropped lines and residents said power and water had returned to the city of 70,000.

The streets were free of the militias that had just a few days ago blocked passage into the city, and the only security on the roads were the government's police and army.

Some signs of destruction from the fighting was evident, with glass from shop fronts and pockmarked buildings.

Anti-Bani Walid graffiti that the Misrata militias had drawn during their capture of the city had been painted over.

The Bani Walid General Hospital was eerily quiet with no patients and very few doctors walked the hallways.

Hospital director Ahmad al-Jidik said the hospital had officially re-opened a week ago but staff were slow to return.

"Parts of the hospital were damaged due to the chaos of the fighting and the looting," he said. "They even stole medicine. The situation is just really bad."

Mtayra Mabrouk entered her home gingerly for the first time since fleeing Bani Walid last month to escape the shelling.

HOMES RANSACKED

While some rooms remained untouched in her house, her living room and bedrooms were turned upside down: the couches, cushions and chairs were toppled over. Cupboards were opened and emptied hurriedly, their contents strewn across the floors. Food from a walk-in pantry was smeared on the floor next to smashed jars of tomatoes and olives.

"I escaped the shelling and went to sleep in the open in a nearby valley before I fled to Tripoli," the 48-year-old widow said.

"If I had known this was going to happen to my house I would never have left. I would have stayed and kept these people from doing this."

Nearby, 64-year-old businessman Hussein Abdel-Rahman said he came back to Bani Walid a week ago to find his house completely burned down.

Walking through the multi-roomed villa, the faint smell of smoke lingered throughout. The walls and ceilings were completely blacked out, the windows had no glass and doors had melted off their hinges.

"What did we do to deserve this?" he asked, shaking his head.

Abdel-Rahman said he thought he was being punished for speaking out when his son had been kidnapped by militias earlier this year.

"They want to take their revenge on us in this city and won't rest until they feel like they have."

Many people in Bani Walid belong to the powerful Warfala tribe, which was mostly loyal to Gaddafi.

The town and its now-displaced inhabitants, long isolated from the rest of Libya, fear retribution and wonder what awaits them in the post-Gaddafi era.

Outside the hospital, vans of the Red Crescent stood handing out food to employees of the hospital. But Crescent worker Malek Omar said one of their main duties in Bani Walid was to look for dead bodies that were left to rot around the city.

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